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Global value chains, value-added generation and structural change in EU core and periphery economies: An Input-Output approach

Author

Listed:
  • Tiago Domingues
  • João Ferreira do Amaral
  • João Carlos Lopes

Abstract

Backward and forward integration are growing in most sectors across the European Union (EU). To benefit from this increasing participation in Global Value Chains (GVC), the increase in imports, namely of intermediate inputs, should be followed by adequate growth in exports. The external dependency of many industries and the corresponding low domestic value-added generated in production,combinedwith relatively weak export potential can cause high trade deficits and growing external debt to GDP ratios. This paper evaluates the inter-industry participation in GVCs considering eightdifferent EU economies and 25 tradable sectors. Based on Input-Output production multipliers and intermediate import coefficients, we propose an empirical method to assess the evolution of vertical specialization, domestic value-added generation and external dependency. After a convenient arrangement of the Leontief inverse matrix, the evolution of backward linkage indicators can be used to detect structural changes, particularly quantifying a "net growth effect" and an "external dependency effect". This method allows the classification of each sector into different areasconsidering their recent structural evolution and it can be useful as a simple, but suggestive, device to compare different economies in a given period or assess their structural development processes in time. Adetailed comparison of one EU periphery country (Portugal) and one EU core country (Germany) is made, based on WIOD data for the period 2000-2014, followed by a brief presentation of sixother cases (Austria, Check Republic, Belgium, Finland, Greece, and Netherlands). Particular attention is given to differences within and between countries before and after the global financial crisis.

Suggested Citation

  • Tiago Domingues & João Ferreira do Amaral & João Carlos Lopes, 2021. "Global value chains, value-added generation and structural change in EU core and periphery economies: An Input-Output approach," Working Papers REM 2021/0157, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
  • Handle: RePEc:ise:remwps:wp01572021
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    References listed on IDEAS

    as
    1. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
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    5. João Ferreira do Amaral & João Carlos Lopes & João Dias, 2011. "External dependency, value added generation and structural change: an inter-industry approach," Notas Económicas, Faculty of Economics, University of Coimbra, issue 33, pages 06-19, June.
    6. Arne J. Nagengast & Robert Stehrer, 2016. "Accounting for the Differences Between Gross and Value Added Trade Balances," The World Economy, Wiley Blackwell, vol. 39(9), pages 1276-1306, September.
    7. Ana Fontoura Gouveia & Filipa Canas, 2016. "Reallocation of Resources between Tradable and Non-Tradable Sectors in Portugal: Developing a new Identification Strategy for the Tradable Sector," GEE Papers 0060, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Feb 2016.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Global Value Chains; Input-Output analysis; External dependency; Structural change;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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